On May 1 the forecast was $7.03, in close agreement with Fonterra’s indication of $7 but three subsequent revisions have been downwards.
The computerised model has a forecast average exchange rate of US71c to the New Zealand dollar built in for the season, AgriHQ dairy analyst Amy Castleton said.
The NZD has just fallen to US68.5c, a lower conversion rate that helped boost the AgriHQ dairy spot price to $7.08/kg, a rise of 9c since it was calculated after the previous GDT event.
The exchange rates factored in helped explain the wide differential between the seasonal forecast and the spot price, plus the influence of the futures market prices, Castleton said.
The spot price indicates what the milk price would be if prices attained at the June 19 GDT event applied throughout the full season, at the current exchange rate.
All dairy commodity prices were weaker at the most-recent GDT on June 19 except butter, which rose 0.8%.
Whole milk powder was down 1%, skim milk powder down 1.1%, rennet casein 2.2%, anhydrous milk fat 2.5% and cheddar 3.6%.
Westpac senior economist Anne Boniface said her milk price forecast is $6.40, contingent on further gradual easing in world prices.
She noted GDT offer volumes are starting to build and will do so in line with rising milk production and the usual seasonal pattern.
The GDT event took place a day after the 2017-18 milk production figures for NZ were announced by the Dairy Companies Association.
They showed the seasonal production in the year to the end of May was down only 0.6% on the previous season.
That was helped by a productive autumn, including May’s figures of 88 million kilograms of milksolids compared with 84m in May 2017 and 148m in April compared with 144m the previous April.
ASB senior rural economist Nathan Penny said the late season production rally appeared to flow through to a touch of price softness in recent GDT auctions.
However, dairy prices started the season on a firm footing and the NZD/USD exchange rate has helpfully dipped below 70c.
The ASB will, therefore, maintain its firm $6.50 forecast, he said.
